Before the Second World War, Britain had more pawnbrokers than it had pubs — a startling statistic that shows how “Uncle” was once woven into the weft and warp of everyday life.

What changed was the welfare state, but John Nichols, chief executive of H&T Group, which owns Britain’s biggest chain of pawn shops, argues that pawnbroking remains part of many people’s lives today. “Generations have always used us and wouldn’t go anywhere else,” he said. One branch, in Edinburgh, has been open for 150 years.

Since Mr Nichols joined the company in 1997, the rise in popularity of car boot sales and eBay has made people more comfortable with dealing their own possessions, he said. In a downturn, there will always be people who turn to a pawnbroker.

Yet the industry, however popular, still has a seedy and downmarket image. “It has because that’s where it came from,” Mr Nichols agreed. Most of the items pledged are jewellery: traditionally, pawnbrokers were attached to jewellers, accessible through a separate, discreet entrance, and the items, if not redeemed, would be sold by the shop itself. Today the industry is heavily regulated. It comes under the ambit of the Office of Fair Trading and the Consumer Credit Act 1974, a viciously complex piece of legislation that sets down exacting standards of practice.

For example, the terms of the loan have to be contained on one sheet of paper, which means that much of the type is a barely readable eight-point. There are moves to simplify this, by means of pending European Union legislation.

The industry still suffers from an image problem. Today, the business is often criticised for charging usurious rates of interest to people excluded from the normal banking system who are, almost by definition, those least likely to be able to afford them.

A typical contract might have an item pledged for a loan of £100 over a six-month period. This may be charged at 8 per cent per month — that is, £8. When the six months are up, the borrower must find that £100 to get the item back and has paid £48 over the period of the loan, although, clearly, items can be redeemed earlier.

This works out as an APR of 101 per cent, if the loan goes to full term. Unredeemed items must be sold by public auction and the proceeds, minus what the pawnbroker is owed, handed back to the customer.

Quoting an APR is not a fair way of comparing his business with other forms of finance, Mr Nichols said, because the loan is not over a year.

In fact, the average size of a loan is £125 and the average time until redemption 3½ months. Surprisingly, 15 per cent of his clients are in the A and B social groups. A number run small businesses. A restaurant or a small double-glazing firm, for example, might need to find a couple of thousand pounds to pay off a bill or buy supplies and they might “pop” their Rolex rather than go for an expensive but temporary extension of their overdraft. “Quite often, people use that as their currency for gaining quick credit,” he said.

As to the charges, Mr Nichols, who is president of the National Pawnbrokers’ Association, argues that these merely reflect the costs that he and his rivals incur in a highly regulated environment. “That’s what it costs to run a business. That’s the average in the industry. It does provide a much cheaper option than being overdrawn at Lloyds. If you don’t allow industries like this to thrive, then . . . it’s going to go underground.”

The vast majority of pledges may be jewellery, but some odd items appear. One branch in Chalk Farm, North London, does a roaring trade in musical instruments and cameras. “The session boys bring their guitars in. Photographers put spare kit in. It’s much safer with us when they go out on an assignment,” he said.

The emphasis on jewellery has led to a specialist sideline in dealing in gold, as the soaring price of the metal has people dredging old medallions and broken chains out of their bottom drawers. Oddly enough, the business is not seeing any great bounce from the recession. “Most people think pawnbroking is doing well, now times are hard. That’s not true from our evidence. We exist in an environment going forward where normal forms of credit may not be available, and we may benefit from that. But there’s no sign of an increase in customers. One or two rivals are doing a bit better, but they concentrate at the upper end of the demographic scale, he said, presumably profiting from the increasing distress of the middle classes.

The H&T chief had initially joined the RAF but flunked the pilots’ exams. Faced with either joining the Hong Kong police or a dodgy-sounding venture flying cargo planes around Biafra, he applied for a job as assistant manager of a bingo hall in South London owned by Rank. He rose to manage the Top Rank business and struck out to run his own chain of bingo halls. Then came the lottery and these failed. “That was a harsh lesson,” he said.

There came a phone call. “What did I know about pawnbroking? Not a great deal.” He “borrowed” some of his wife’s jewellery — she got it back — and went out to do some research. A trawl at the local library found that the country had about 800 pawnbrokers. At the interview, he discovered that no one else had ever bothered to find this out. H&T, then known as Harvey & Thompson, was the biggest and it had only 37 branches.

The industry resembled bingo in the old days, including its image problem. When he arrived bingo had been “ladies in curlers, kids outside, spending the housekeeping”. Bingo and pawnbroking even shared the same customer demographic.

“I thought the people running those shops were good people,” he said. “I thought, here was an industry that really needed to be brought into the 20th century, let alone the 21st.” At the time Harvey & Thompson, which had been through some financial hard times, was owned by Cash America, a US business. After Mr Nichols joined as managing director in 1997, growth was slow. By 2004, they had opened only another 20 shops. The Americans wanted out and he led a £49 million buyout. The company’s market capitalisation is now about £65 million and it has 93 shops.

Away from head office in Sutton, South London — H&T was bombed out of Canary Wharf by the IRA in 1996 — Mr Nichols shoots, trains golden retrievers to do their proper job of retrieving game and takes part in rally driving. He is co-driver of a 1970 911 Porsche. His job is to navigate the driver around the track.

“It’s about being able to give somebody the confidence to win,” he said. He admits he is something of an action man. His maxim is: “You are only around this way once. You’ve got to pack all you can into your life.”

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